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Delaware exchange overview

How hard is Delaware fighting to preserve the Affordable Care Act’s provisions? Compare to other state efforts.

Delaware’s exchange is a partnership between the state (Choose Health Delaware) and HHS, with residents enrolling through HealthCare.gov. Delaware is responsible for plan management and consumer assistance while the federal government handles all other functions.

Two health insurance companies offered coverage in the exchange in 2017, but that dropped to just one – Highmark BCBS of Delaware – in 2018, and Highmark continues to be the only insurer offering plans in the state’s exchange in 2020.

Highmark already covered more than half of Delaware’s exchange enrollees as of 2017, but nearly 12,000 people with Aetna coverage had to select new plans from Highmark for 2018.

Delaware received federal approval to implement a reinsurance program for 2020, and also enacted legislation to codify ACA consumer protections into state law. Highmark had already proposed a premium reduction for 2020, and the rate decrease was even more significant once the reinsurance program was approved.

Delaware codifies ACA consumer protections into state law

In August 2019, Delaware Governor John Carney signed SB35, codifying various ACA consumer protections into Delaware state law and joining several other states that have taken similar action over the last few years. Although the ACA remains the law of the land, Delaware’s new law ensures that if the ACA is ever repealed or changed, its consumer protections will remain in effect in Delaware.

Governor Carney also signed legislation that ensures adult Medicaid enrollees in Delaware will have dental coverage.

Delaware’s reinsurance program took effect in 2020

In June 2019, Governor Carney signed HB193 into law, paving the way for Delaware to create a reinsurance program in order to stabilize the state’s individual insurance market. The legislation called for an assessment on insurers in the state, plus federal pass-through funding to cover the cost of the reinsurance program.

Reinsurance programs work by paying a portion of high-cost claims, which reduces costs for insurers (Delaware’s reinsurance program pays 75 percent of claims that are between $65,000 and $215,000). Because their claims costs are lower, insurers can charge lower premiums. This results in higher enrollment among people who have to pay full-price, and it also means that the federal government spends less on premium subsidies, as the subsidies don’t have to be as large in order to bring net premiums down to an affordable level.

Delaware estimated that the reinsurance program would cost about $44 million in 2020, and that 80 percent of that will be covered by the federal pass-through funding, with the state generating the other 20 percent via the health insurer assessment (1 percent in years when the ACA’s Health Insurance Provider Fee is assessed, and 2.75 percent in years that it isn’t). Early in 2020, CMS estimated that Delaware’s pass-through funding would amount to $21.7 million in 2020, which was less than the state had initially projected.

Delaware submitted a 1332 waiver proposal to CMS in July 2019, and it was approved in mid-August. With the reinsurance program in place, Delaware projected that premiums in the individual market to be 13.7 percent lower in 2020 than they would otherwise have been, and that enrollment in the individual market would increase by as much as 2.3 percent, thanks to smaller premiums for people who don’t get premium subsidies (for those who do get subsidies, the subsidies shrink commensurately with the cost of the benchmark plan).

19% rate decrease for 2020, thanks in large part to reinsurance

Highmark initially proposed an average rate decrease of 5.85 percent for 2020. The filing, which was submitted before the state’s reinsurance legislation was enacted, noted that it did not account for the reinsurance program (including the insurer assessment that would fund the program as well as the impact of the reinsurance program itself), and that a new filing would need to be submitted if and when the reinsurance program was approved.

The 1332 waiver proposal that Delaware submitted to CMS in July noted that with the reinsurance program in place, premiums were expected to be 13.7 percent lower in 2020 than they would otherwise have been, and up to 20 percent lower in future years than they would otherwise have been (the waiver proposal is for a five-year program).

Enrollment grew in 2020, after declining for three years in a row

23,961 people enrolled in plans through Delaware’s exchange during the open enrollment period for 2020 coverage. That was an increase of about 6 percent over the number of people who enrolled the year before, and came on the heels of three straight year-over-year enrollment declines.

The enrollment drops in recent years were not unexpected. For 2019, two significant factors were the elimination of the individual mandate penalty after the end of 2018 and the Trump Administration’s decision to sharply reduce funding for exchange marketing and enrollment assistance, after already implementing funding cuts the year before. In many states, the expansion of short-term plans also played a role in declining enrollment for 2019, but Delaware regulators implemented emergency regulations that limit short-term plans to just three months in duration, eliminating the option for people to use them as long-term coverage alternatives to ACA-compliant plans. There was a window, however, from early October until the end of November, when residents in Delaware were able to purchase longer short-term plans, and some may have done so in order to obtain coverage for much of 2019.

The enrollment increase in 2020 also was not unexpected, as Delaware’s new reinsurance program resulted in lower premiums for people who don’t get premium subsidies, making coverage more affordable for that population.

Enrollment in individual market plans through Delaware’s exchange has reached the following totals during open enrollment each year:

Although enrollment in the exchange dropped about 20 percent from 2016 through 2019, Delaware’s 1332 waiver proposal noted that total individual market enrollment in the state (including on-exchange and off-exchange enrollment) had dropped by 37 percent in that same time period. Off-exchange enrollees don’t get premium subsidies, but the state’s new reinsurance program has made their coverage more affordable, potentially resulting in enrollment gains outside the marketplace as well.

In April 2018, the Department of Insurance published an extensive guide to 2019 rate and form filing submissions, but it did not address the CSR loading issue. The Department of Insurance clarified that they were not leaving the decision entirely up to Highmark, and had been involved in numerous meetings with the insurer about 2019 coverage.

The final rate approval notice clarifies that the cost of CSR was added only to silver plan rates for 2019, as opposed to the broad load strategy that was used for 2018. And the approved rate notice also clarified that the cost of CSR was not added to premiums for plans purchased outside the exchange, which means that Highmark only added the cost of CSR to on-exchange silver plans. That’s the best approach for consumers, as it allows people who don’t qualify for premium subsidies to purchase an off-exchange plan (if they want a silver plan) and not have the added cost of CSR baked into their premiums.

2018 coverage: Aetna out, Highmark left as the only insurer; 25% average rate increase included adding cost of CSR to all premiums.

Highmark Blue Cross Blue Shield of Delaware had the majority of the market share in the state’s exchange in 2017, and they became the only available option as of 2018.

Aetna confirmed in May 2017 that they planned to exit all four of the exchanges where they offered coverage in 2017, including Delaware, at the end of the year. The Delaware Department of Insurance reported that Aetna insured 11,854 people via exchange plans in 2017 (about 42 percent of the exchange enrollees), all of whom needed to pick a new plan for 2018.

In response to Aetna’s market exit announcement, Trinidad Navarro, Delaware’s Insurance Commissioner, said “I would hope that our elected officials in Washington will come up with solutions to guarantee that health insurance in Delaware and elsewhere is both available and affordable. Continuing funding for Cost-Sharing Reductions is a first step in the right direction.”

The Trump Administration’s lack of commitment to funding the ACA’s cost-sharing reductions (CSR) was a driving factor in the rates that insurers filed for 2018. Insurers in most states — including Delaware — added the cost of CSR to premiums for 2018. That ended up being a prescient decision, as the Trump Administration announced in mid-October that CSR funding would end immediately.

Highmark initially proposed an average rate increase of 33.6 percent, but ultimately agreed to a 25 percent average rate increase in October. Their rate filing noted that the average rate increase would have been about 16.8 percent if CSR funding had continued and if the federal government was robustly enforcing the individual mandate (the mandate was still in effect in 2018, although it’s been eliminated as of 2019. But insurers were concerned in 2017 that the Trump Administration might not adequately enforce the mandate for 2018, leading to higher premiums in many areas).

The Delaware Department of Insurance confirmed that the cost of CSR was added to premiums at all metal levels for 2018 (ie, a broad load). And Highmark’s rate template indicated that average rate increases for all of their plans were in a very narrow range of about 23 – 26.5 percent, with the average increase for silver plans is roughly the same as the average increase for plans at other metal levels.

Ultimately, only a handful of other states opted to add the cost of CSR to plans at all metal levels: Colorado, Mississippi, West Virginia, and Indiana. For 2019, Delaware and Colorado both switched to adding the cost of CSR only to silver plans, although Mississippi, West Virginia, and Indiana have continued to use a broad load strategy.

Highmark had about 91,600 members enrolled in exchange plans across Delaware, Pennsylvania, and West Virginia in 2018 (including all of the exchange enrollees in Delaware, since Highmark is the only insurer offering exchange plans in the state. That’s down from about 350,000 exchange enrollees in those three states in earlier years of exchange implementation, when the insurer was actively pursuing that market. But amid concerns about financial losses in the exchange markets, Highmark scaled back, reduced network sizes, and generally became much less aggressive in their approach to exchange market share. In 2017, however, for the first time, Highmark made money on its exchange business, after losses in the prior years. Exchange plans make up a tiny fraction of the insurer’s overall book of business, which includes 4.6 million members.

2017 rates

Two companies offered health insurance through Delaware’s exchange for 2017: Aetna and Highmark Blue Cross Blue Shield of Delaware. Aetna had a PPO division and an HMO division, which were listed as separate entities for rate filings. Although Aetna exited the exchanges at the end of 2016 in most of the states where they had been participating, Delaware was one of four states where continued to offer exchange plans in 2017 (although they ultimately exited all four states at the end of 2017).

Higher subsidies offset the bulk of the rate hikes for exchange enrollees who are subsidy-eligible, which accounts for the large majority of enrollees.

2016 rates

A study released in December 2014 by The Commonwealth Fund showed just a 3 percent increase in average marketplace premiums for Delaware between 2014 and 2015. The weighted analysis looked at rates across all metal tiers and in urban/suburban/rural areas of most states.

But rate increases the following year, for 2016 coverage, were much more significant. On September 29, 2015, Stewart announced final rates for 2016, after vowing earlier in the year that the Insurance Department in Delaware would “vigorously examine” the 2016 rate proposals they received from the state’s two exchange insurers, hoping to find ways to reduce the final rates.

Highmark Blue Cross Blue Shield of Delaware initially requested an average rate increase of just over 25 percent in the individual market, although they increased their proposed rate increase to 33 percent in August. State regulators ultimately approved a 22.4 percent average rate increase for Highmark’s individual market plans, and Highmark had almost 95 percent of the individual market share in Delaware, including both on and off-exchange enrollments.

Aetna proposed raising rates by an average of nearly 17 percent for 2016, which was approved by regulators.

In 2014, Highmark garnered more than 90 percent of the exchange market share. For 2015, they only increased their average rates by 4 percent. Highmark’s rates increased significantly for 2016, but their market share remained similar to what it had been in 2015.

No discrimination against transgender enrollees

In March 2016, Delaware became the 15th state to prohibit health insurance companies from discriminating against transgender enrollees. The rules apply both on and off exchange, and in the individual and group market.

The bulletin issued by Insurance Commissioner Karen Weldin Stewart specifically notes that while the plan that constitutes the Essential Health Benefits benchmark plan in Delaware for 2016 did have an exclusion for “change of sex surgery” (except for correcting a congenital defect), the bulletin detailing the ban on transgender discrimination supersedes the benchmark plan design, and that insurers may not issue such a blanket exclusion.

Specialty drugs costs are capped under Delaware law

Delaware is one of several states that have taken steps to limit patients’ out-of-pocket costs for prescription drugs. Delaware law limits specialty drugs to $150/month copays or coinsurance. The regulations apply on and off-exchange, and to employer-sponsored plans that are regulated by the state (self-insured plans are regulated by the federal government under ERISA instead).

And Delaware insurance plans are not allowed to designate all drugs in a particular drug class as specialty drugs, so patients shouldn’t have a situation in which their only available drugs are specialty drugs.

Delaware opted to stay with federally-run exchange

In the months leading up to the Supreme Court’s 2015 ruling on King v. Burwell, Delaware devised a back-up plan. Because Delaware uses the federally-run marketplace (the state has a partnership exchange, which is a variation of the federally-run exchange), subsidies were in jeopardy in the state. If the King plaintiffs had prevailed, an estimated 18,000 people would have lost their subsidies in Delaware. And statewide, the entire individual market would have seen spiraling premiums over the next few years as healthy individuals dropped coverage that became unaffordable without subsidies.

To avoid that outcome, the state submitted a proposal for transitioning from a state-federal partnership exchange to a federally-supported state-based marketplace (Oregon, Nevada, Arkansas, Kentucky, and New Mexico use that model as of 2019, with state-run exchanges that utilize Healthcare.gov for enrollment). And on June 15, 2015, HHS issued conditional approval for Delaware’s plan (Pennsylvania and Arkansas also got conditional approval for state-run exchanges as contingency plans in case the Court had sided with King).

At that point, Delaware was the only state with a Democratic governor and Democratic majority in both congressional chambers that didn’t have a state-run exchange, in large part because the state’s small population would make it financially difficult to sustain an exchange.

But then on June 25, the Supreme Court ruled that subsidies are legal in every state, including those that use the federally-run marketplace, meaning that subsidies would continue to be available in Delaware regardless of whether the state runs its own exchange. Initially, it was unclear whether Delaware would continue with their plan to implement a supported state-based marketplace. The state issued a press release immediately after the King verdict was announced, stating that they would continue to evaluate the possibility of transitioning the exchange, and make a decision later in the summer.

But in August 2015, Delaware officials announced that they would continue to operate as a state-federal partnership exchange, noting that it would be more cost-effective than operating their own exchange.